What to do if your 401(k) stinks

By Matthew Heimer

Most personal-finance journalism about investing assumes that you, the reader, have access to a wide range of investment vehicles, at reasonable prices, and that you can easily get professional advice if you decide you need it. But if a significant chunk of your retirement nest egg is tied up in a 401(k) plan, there’s a chance that none of those things are true. Your range of investment choices may look like a strip-mall diner menu (too many options, none of them good); your fees might be inordinately high; your employer may be putting little or no effort into getting you the information you need. (For a lively overview of the 401(k) mess, see Ian Salisbury’s April 2012 cover story from SmartMoney magazine, and his Encore posts here and here on the evolving effort to fix it.)

What should you do if, to steal a phrase from U2, you’re stuck in a 401(k) you can’t get out of? Jim Philips, a financial adviser who runs the firm Retirement Resources out of Peabody, Mass., offers some tips in his essay Making the best of a lousy 401(k) plan. (Philips is one of the MarketWatch RetireMentors, financial pros who offer their advice and opinions, uncompensated, in the Retirement section.) He has some broad ideas about how best to react to your plan’s weaknesses, including advice on weighing the pros and cons of abandoning your plan and recommendations about keeping mutual-fund performance in perspective. But Philips also makes the point that sometimes the investor is as big a problem as the plan—what he colorfully calls “operator error”—and he puts forward some common-sense guidelines that can keep indiscipline and emotional overreaction from knocking you off track.

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About Encore

Encore looks at the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities, needs and priorities of people saving for and living in retirement. Our lead blogger is editor Matthew Heimer, and frequent contributors include editor Amy Hoak, writer Catey Hill, and MarketWatch columnists Elizabeth O’Brien, Robert Powell and Andrea Coombes. Encore also features regular commentary from The Wall Street Journal retirement columnists Glenn Ruffenach and Anne Tergesen and the Director of the Center for Retirement Research at Boston College, Alicia H. Munnell.